The level of inflation globally has increased significantly. However, the European Central Bank (ECB) has stated that it will not change the interest rates.
The US Federal Reserve has been discussing monetary policies to curb the rising levels of inflation in the US that sit at a four-decade high. In January, financial markets tumbled following speculations of rising interest rates.
European Central Bank will not raise interest rates
The European Central Bank has been under pressure to aid the economy from rising inflation rates. The inflation has increased month-on-month, and in January, it hit a record 5.1%.
The ECB has predicted that the level of inflation will drop in 2022. However, some analysts have noted that waiting for inflation to drop could result in rising consumer prices and affect the economy’s recovery.
A report from CNBC noted that the president of ECB had said that “inflation is likely to remain elevated for longer than previously expected, but to decline in the course of this year.” She also opined that increased energy and food costs fueled the current rise in inflation.
“With the upside surprise we have seen first in December, second in January, I can tell you there was unanimous concern around the table of the Governing Council about inflation numbers,” she added. However, she noted that the numbers show that the risk of inflation was high “in the near term.”
Impact of rising inflation on crypto
As aforementioned, the US Federal Reserve spooked the financial markets after hinting that interest rates would be raised to curb the rising inflation. The cryptocurrency halved in value from the November highs. Moreover, the market has failed to make any major recovery despite the Fed meeting happening in late January.
Cryptocurrencies, especially Bitcoin, have found a use case in hedging against inflation. In November, analysts stated that Bitcoin rallied to an all-time high as it was being adopted as a hedge against the rising inflation levels globally. However, with the rising interest rates, liquidations are expected across financial markets, especially in the crypto space.
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